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Woolies defies retail conditions

Supermarket retailer Woolworths Limited (ASX: WOW) has reported a 2.5% rise quarterly sales to $14.4 billion, despite the challenging retail conditions.

Sales growth has been driven by its core food and liquor division, which includes supermarkets, BWS and Dan Murphy’s stores, which saw a 5.6% rise in revenues.

Home Improvement, which includes Masters and HoME Timber and Hardware, recorded a 37% rise in sales to $290 million, on the back of 4 new Masters stores and 6 HoME hardware stores acquired during the quarter. Woolworths now has 29 Masters stores opened, with another planned to open before the end of June.

Hotel sales also jumped, rising 19.7%, driven by the acquisition of 29 hotels in New South Wales, two in Queensland and one in WA in the first half of the 2013 financial year, as well as Victorian gaming regulatory changes.

Big W also saw rising sales, up 1.8% adjusted for the Easter period, although like for like sales fell 0.8%. Home entertainment declined further, showing how consumers are choosing to either buy their electronics, DVDs and music online, or through retailers such as JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings (ASX: HVN).

CEO Grant O’Brien said while the result was pleasing, there is still a lot more work to do in transforming the business. He added that the company continued to increase market share, customer numbers, basket size and items sold, compared to the prior year. Price deflation continues to be an issue, with average prices falling 2.5%, although it appears to be slowing, with the previous quarter recording 2.8% price deflation.

Pleasingly, online sales increased by 36% for the quarter, reflecting ongoing changes to customer shopping preferences.

Foolish takeaway

Yet another great quarterly result from the supermarket retailer. Despite intense competition with Coles – owned by Wesfarmers Limited (ASX: WES), IGA supermarkets and Aldi, Woolworths continues to deliver fantastic results, and investors could do much worse than having this stock in their portfolio.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Woolworths and JB Hi-Fi.

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